- The Washington Times - Sunday, February 22, 2009



With the giant, secretive Swiss bank UBS agreeing in a settlement to give up the names of “certain United States clients,” some 19,000 U.S. tax cheats who concealed $20 billion in assets from the IRS - figures alleged by the U.S. Justice Department - may be revealed. As the joke goes about what one says after receiving news there were no survivors of the sinking of a boatload of lawyers (or bankers, or the favorite villain of the day), “That’s a start.” In fact, the next day the Justice Department pressed on, seeking information from UBS on a new total of 52,000 Americans suspected of avoiding taxes while having secret offshore accounts.

Since the Middle Ages, Swiss banks have made the CIA and old KGB look effusively revelatory, one reason money flows into them and Swiss banking is a foundation of that nation’s economy. Federal prosecutors put the squeeze on UBS, Switzerland’s largest bank, examining 19,000 accounts, getting an admission from the bank that from 2000 through 2007 its employees had “participated in a scheme to defraud the United States” by setting up and concealing offshore accounts, and obtaining a settlement that UBS would cooperate to turn over names or the bank and its executives could be indicted. UBS also will pay $780 million to settle the investigation - $380 million representing profits from its cross-border transactions and $400 million for U.S. taxes the bank failed to withhold on the accounts.

Tax evasion is not a criminal offense under Swiss law, but it sure is under U.S. law. How many American cheats ultimately will be identified is as yet unknown; they now have a tough choice of either going to the IRS and paying up voluntarily, or hide their money again, leaving a trail that could leave them even more vulnerable to prosecution. Our hearts bleed for their agony.

This may be the end of the Swiss secretive banking system, as the Swiss fear, since tax avoiders can’t be sure their tax fraud is any longer safe in Swiss banks. Unfortunately, there are other countries still available, including a number of Caribbean countries (one of them being Antigua, where Texas financier Allen Stanford, accused by the Securities and Exchange Commission of an $8 billion financial scam, allegedly laundered money at a bank his company ran). Even within Europe, the situation is so bad that the European Commission earlier this month proposed new measures aimed at European Union residents opening accounts in Luxembourg, Belgium and Austria, which have high levels of banking confidentiality. The EU believes tax fraud is costing member countries $320 billion in unpaid taxes every year. The Justice Department and State Department should form a tag team and a coalition of the willing (France and Germany, for example, are pushing efforts to clamp down on tax fraud) to wrestle against recalcitrant countries and their tax cheating clients. The IRS and their counterparts in many nations need the money from bilkers. More important, they deserve it.

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